Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If You Use a Screen Reader

This content is available through Read Online (Free) program, which relies on page scans. Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.

Asymmetric Information, Bank Lending and Implicit Contracts: A Stylized Model of Customer Relationships

Steven A. Sharpe
The Journal of Finance
Vol. 45, No. 4 (Sep., 1990), pp. 1069-1087
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328715
Stable URL: http://www.jstor.org/stable/2328715
Page Count: 19
  • Read Online (Free)
  • Download ($33.95)
  • Subscribe ($19.50)
  • Cite this Item
Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Asymmetric Information, Bank Lending and Implicit Contracts: A Stylized Model of Customer Relationships
Preview not available

Abstract

Customer relationships arise between banks and firms because, in the process of lending, a bank learns more than others about its own customers. This information asymmetry allows lenders to capture some of the rents generated by their older customers; competition thus drives banks to lend to new firms at interest rates which initially generate expected losses. As a result, the allocation of capital is shifted toward lower quality and inexperienced firms. This inefficiency is eliminated if complete contingent contracts are written or, when this is costly, if banks can make nonbinding commitments that, in equilibrium, are backed by reputation.

Page Thumbnails

  • Thumbnail: Page 
1069
    1069
  • Thumbnail: Page 
1070
    1070
  • Thumbnail: Page 
1071
    1071
  • Thumbnail: Page 
1072
    1072
  • Thumbnail: Page 
1073
    1073
  • Thumbnail: Page 
1074
    1074
  • Thumbnail: Page 
1075
    1075
  • Thumbnail: Page 
1076
    1076
  • Thumbnail: Page 
1077
    1077
  • Thumbnail: Page 
1078
    1078
  • Thumbnail: Page 
1079
    1079
  • Thumbnail: Page 
1080
    1080
  • Thumbnail: Page 
1081
    1081
  • Thumbnail: Page 
1082
    1082
  • Thumbnail: Page 
1083
    1083
  • Thumbnail: Page 
1084
    1084
  • Thumbnail: Page 
1085
    1085
  • Thumbnail: Page 
1086
    1086
  • Thumbnail: Page 
1087
    1087